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Outgoing ATO boss says getting rid of work-related tax deductions would be a ‘big step’

New Zealand banned work-related expense deductions while also implementing tax cuts, and if Australia did the same that could simplify the tax system, according to outgoing tax commissioner Chris Jordan.

But Mr Jordan noted that “Australians love their work-related expense deductions” and that abolishing them in favour of lower personal income tax rates “would be a big step”.

He was speaking on Wednesday at the National Press Club in his last public outing as tax commissioner before he officially exits the Australian Taxation Office (ATO) next week.

In March, a man with 30 years of public service experience, Rob Heferen, will step into the top job at the ATO.

Mr Heferen has previously worked at the ATO and also served as the deputy secretary of Revenue Group at the Treasury between 2011 and 2016, where he had responsibility for tax policy, tax legislation and revenue forecasting.

Mr Jordan reflected on his 11-year tenure and was also asked about the thousands of Australians that have been advised they have old tax debts – ranging from a few cents to thousands of dollars – that could be taken from their future refunds after they lodge their tax returns.

He said the ATO had no choice but to chase these amounts that were once deemed “uneconomical to pursue” and it would be up to the minister of finance to write off individual debts in cases of hardship.

Mr Jordan also revealed the scale of cyber attacks the agency was having to constantly deal with.

He said the ATO defends against almost 5 million attempted cyber attacks each month.

“On average, we defend against 4.7 million attempted cyber attacks each month — 4.7 million attempted intrusions each month, that target our websites, our services, and our infrastructure.”

He was also asked whether, in the wake of the PWC tax leaks scandal, there needs to be greater regulation and if the size of the big four partnerships should be limited.

He said it was not for government or regulators to determine the size of private enterprise, but the issue of consultancies and how they are regulated was worthy of broader policy discussion.

Will Australia ever do away with work-related expense deductions?
The number of Australians claiming deductions has increased in recent years, especially since more Australians claim work-from-home expenses.

In 2021-22, almost 9 million Australians claimed about $22 billion worth of work-related expenses. Five million of those were related to working from home.

Mr Jordan was asked a question about whether Australia’s marginal personal tax rate was too high, which he did not directly answer.

But he said it was the ATO’s job to ensure taxpayers follow the rules and that it was common for some taxpayers to try to split their pay so that their incomes get taxed at a lower corporate tax rate rather than a higher individual rate.

Tax reforms in New Zealand in the 1980s, which provided income tax cuts, also involved the removal of work-related expense deductions.

“Countries like New Zealand took some pretty drastic steps — and I think it’d be difficult here – (but) they abolished all work-related expenses — all of them,” Mr Jordan told the National Press Club.

“And they reduced the top marginal rate to 30 per cent. I think they’ve since put it up (it is now 39 per cent), but Australians love their work-related expense deductions.”

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